HSBC's preliminary reading for its purchasing managers' index (PMI), which tracks manufacturing activity in China's factories and workshops, contracted in February to its lowest level in seven months.

The index, a closely-watched gauge of the health of the Asian economic powerhouse, also tumbled in January, losing ground for the first time in six months.

The outcome hit currency markets, with traders moving into the yen which sank to 101.87 in Tokyo from 102.31 yen on Wednesday in New York. The euro weakened to 140.18 yen from 140.51 yen in U.S. trade, while it rose to US$1.3780 from US$1.3734.

Tokyo shares slumped 2.15 percent, or 317.35 points, to finish at 14,449.18 after the January trade deficit swelled on the back of surging imports. Seoul's main index lost 0.64 percent, 12.36 points, to 1,930.57.

Chinese shares also lost ground, with the benchmark Shanghai Composite Index ending down 0.18 percent, or 3.77 points, to 2,138.78. The Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 1.55 percent, or 17.93 points, to 1,139.27.

Sentiment was also hurt after the central bank drained 60 billion yuan (US$9.9 billion) from the interbank market through its regular open market operations on Thursday, in an effort to slow credit growth.

Europe's main stock markets slid on Thursday following a slump for share prices across Asia after poorly-received Chinese data and on the outlook for U.S. stimulus, traders said.

London's benchmark FTSE 100 index fell 0.28 percent to stand at 6,777.96 points approaching midday in the British capital, weighed down by a heavy drop in the share price of British defence group BAE Systems.

"Another piece of poor data from China ... with markets getting no favours from Fed minutes either after the January minutes re-affirmed intentions to wind down stimulus by year-end," said Toby Morris, a senior trader at CMC Markets.

The European single currency fell to US$1.3697 from US$1.3733 late in New York on Wednesday.

The euro slipped to 82.27 British pence from 82.33 pence, while the pound retreated to US$1.6649 from US$1.6680.

On the London Bullion Market, the price of gold fell to US$1,314.54 an ounce from US$1,320.50 on Wednesday.

On the corporate front, shares in BAE tumbled 8.22 percent to 400.9 pence after the company warned that earnings would drop this year on cuts to government spending in its main market the United States.